Amazon faces potential FTC penalties over allegedly misleading advertising practices

Amazon may be staring down another costly fight with the Federal Trade Commission. Bloomberg reported that the FTC is preparing a potential lawsuit against the company over allegedly misleading advertising practices, with civil penalties likely on the table if the agency moves forward.

The investigation centers on whether Amazon adequately disclosed how its advertising auctions work, specifically around reserve pricing mechanisms and the terms offered to advertisers. In plain English: the FTC wants to know if Amazon was upfront with the businesses paying to advertise on its platform, or if it buried key details about how much they’d actually end up paying.

A pattern, not an incident

In September 2025, Amazon reached a $2.5 billion settlement with the FTC over its Prime subscription practices. That deal included a $1 billion civil penalty and $1.5 billion earmarked for consumer refunds. The settlement addressed complaints about how Amazon handled Prime sign-ups and cancellations.

Now, less than a year later, the agency is reportedly drafting a preliminary complaint on an entirely different front. The FTC has been actively overseeing Amazon’s business practices since at least 2023, and the advertising probe suggests the agency isn’t satisfied that past penalties have changed the company’s behavior in meaningful ways.

Amazon isn’t the only tech giant in the FTC’s crosshairs on advertising, either. The agency launched a similar investigation into Google’s ad practices in September 2025, signaling that advertising transparency across the sector has become a priority for regulators.

What the FTC is actually looking at

The core of the probe involves Amazon’s advertising auction system. The question is whether Amazon was transparent about how those auctions functioned.

Reserve pricing is the specific mechanism under scrutiny. A reserve price is essentially a floor, the minimum amount an ad slot will sell for regardless of what advertisers bid. The FTC’s concern appears to be that Amazon didn’t adequately disclose these reserve prices or the broader terms governing its ad auctions.

What this means for investors

The financial stakes here go beyond the direct penalty. Amazon’s $2.5 billion Prime settlement last year demonstrated that the FTC is willing to extract significant sums from tech companies it believes have crossed the line. A new enforcement action on advertising could follow a similar playbook.

The broader regulatory trend is hard to ignore. The FTC’s parallel investigations into Amazon and Google suggest the agency views digital advertising transparency as a systemic issue, not a company-specific one.

The preliminary complaint hasn’t been filed yet, and Amazon will almost certainly contest the allegations.

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